September 16, 2021

Bureaucrats forced to come clean on consulting spend

It is expected to reduce administration and tendering efforts across departments and increase transparency through improved data and reporting. The new reporting requirements will begin by July 2021, starting with spending on financial management advisory services.

“The government has introduced new rules to require reporting on the total spend on contracts and consultancies from the 2020-21 year onwards, as well as to report the amount spent on the largest such contracts, to ensure consistency across all agencies,” Senator Cormann said.

Government agencies will also have to standardise the way they report on their spending on consultants and contractors in their annual reports.

The big four consulting firms booked more than $600 million in federal government contracts last financial year, with KPMG outpacing rivals to take about a third of the spend.

Defence was the biggest spender, entering into contracts worth $286 million with the big four in 2019-20. This was followed by Services Australia ($35 million) and the health department ($33.6 million).

Growing spend

The total spend with consulting giants has nearly tripled in a decade, as public service departments spent close to $1.2 billion with just eight firms in 2018-19.

After job cuts that reduced the federal public service workforce back to Howard-era levels, outsourcing and contracting dollars being spent because of the “need for specialised or professional skills” have increased dramatically.

Currently the Department of Finance struggles to even define and track “consultant” spending, with the AusTender contract system shown by the Auditor General and parliamentary inquiries to be incapable of providing a reliable picture of the way public money was spent on external advisers and workers.

Senator Cormann has consistently defended the spending on contracts and consultants, saying the public service should work with external providers and maintain “a clear-eyed view of technological advances, capability readiness and surge capacity.”

In the budget papers he noted that the use of consultants and contractors had allowed the public service “to respond with unprecedented agility during the bushfires and the COVID-19 pandemic.”

Contracts with the largest providers of external consulting services grew from nearly $400 million in 2009-10 to nearly $1.2 billion last financial year, an audit report released in March showed.

The report found the government’s total procurement bill through its AusTender website cost taxpayers $64.5 billion in 2018-19, up from $47.4 billion two years earlier.

In the decade to 2018–19, procurement contracts cost taxpayers more than $490 billion.

Contracts flagged as consultancy spending on AusTender were worth $647 million in 2018-19, up from a 2013-14 low of $365.9 million.

The biggest spending for consulting and contracting was shared between big four players KPMG, PwC, Deloitte and EY, as well as McKinsey, GHD, engineering giant AECOM and law firm Clayton Utz.

Together, the eight companies won contracts worth nearly $1.2 billion last financial year, with KPMG taking the largest share.

The federal public service workforce will peak at more than 170,000 workers in 2020-21, with falling employment levels as thousands of extra jobs added to deal with the COVID-19 pandemic are cut.

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